View from the top: Mike Foley, Zurich Insurance Group Ltd.Reprints
Mike Foley was named CEO North America for Zurich Insurance Group Ltd. last year when the global insurer announced a series of organizational changes aimed at simplifying its structure, reducing its costs and improving its results. He joined Zurich from McKinsey & Co. in 2006. Mr. Foley recently spoke with Business Insurance Editor Gavin Souter about how the changes at Zurich will affect the insurer’s operations and its customers. Edited excerpts follow.
Q: What do the changes at Zurich globally mean for the North American operations?
A: One of the first things that (new Zurich Group CEO Mario Greco) did organizationally was to emphasize geography. So he named country CEOs so that the country CEO was responsible for all the activity within the country … Later, in September, we announced that we were also going to have a global commercial unit, led by Jim Shea. The logic here is that when you look at the customers we serve and the value propositions that we offer and deliver, particularly in the commercial space, many of our customers are larger than a single country in terms of their exposures. And so, there’s no way that you can say we’re going to have a country leader and that’s all we care about ... Some of those commercial risks will tend to be predominantly in-country and some of those will be multinational, but we do have a matrix that looks at both the commercial side and the country side.
In North America, we took our commercial markets unit, which was predominantly our core middle-market book — although we had some industry verticals like construction and health care that went up to very large sizes — and our global corporate book and we (merged that together effective Jan. 1) under one leader, Paul Horgan. He’ll have a matrix to me and to Jim Shea. By doing that, we think we break down silos and say that in the marketplace now there’s one business leader responsible for really every size risk. And then we still have our specialty products unit, which is led by Bryan Salvatore, and those two units comprise what we think of as commercial in North America.
And then we still have our alternative markets unit, which is our crop business and our direct markets business and all of our program business.
Q: What does that mean for your large corporate customers? How will things be different for them?
A: What it means for how we go to market is that it’s simpler to access Zurich because you know if you have a special line that you’d go to our specialty products unit, and that’s how special lines are typically handled. But if you’re any other customer, you don’t have to worry about “am I global corporate customer or am I a commercial markets customer,” you just come to Zurich through the brokerage channel and we find the place you land.
Also, whenever you create a dividing line, you run the risk of having white space and gaps. Prior to this move, there could be a customer that’s an upper-middlemarket sized customer but has a pretty complicated risk to address and might need a different property form or different property expertise than what we typically have in our standard middle-market space.
If it worked perfectly, we’d find a way to get someone access to that expertise, but if you have two separate units it doesn’t always happen. Now that it’s in one unit, we expect it to more seamlessly flow to whoever has the expertise.
Similarly, there’s often fairly large customers that actually have pretty straightforward simple risks, and you run the risk that if someone’s used to doing complex transactions, they might not pursue what could be a very attractive opportunity.
Q: Over the past year, you’ve been reunderwriting and rebalancing your book. How is that progressing?
A: I think we overemphasized it a year ago versus how it has felt and should be felt in the marketplace. There was a small percentage of our book — several specific lines within North America — that we decided that we were going to exit, and those were transportation (long-haul trucking and some passenger transport services) and monolined boiler machinery, so very small lines of business and very focused lines of business as a percentage of our total book.
And then beyond that, we’re really doing what we think everyone does all the time, which is looking at our renewal book and trying to make sure that we understand the accounts that we think are well-priced and well-positioned and good risks that we want to retain, and those accounts that are a little more challenged in terms of the premium that we’re receiving for the risk that we’re being asked to bear.
Q: What’s your view on the market?
A: The market remains highly competitive. It’s clearly one where I think the most recent industry rate monitors would show that industry rates on average are zero to very low single digits. That clearly varies by line of business, so property — and particularly larger layer property — is probably the most under pressure.
On the other side of the coin, auto is probably the line that people are consistently pointing to as needing and actually getting rate in the marketplace.
This does still feel different to me in this cycle … with increased transparency and increased understanding. I think the wellpositioned carriers can navigate through what is clearly a challenging market.
Q: Zurich has recently constructed a new headquarters building in Schaumburg, Illinois. Is there any wider strategy behind that?
A: It’s a reaffirmation of a key part of the strategy, which is Zurich’s commitment to North America. We’ve been here since 1912, and we’ve been in Chicagoland the whole time. This is a long-term lease and a long-term commitment to the marketplace, and one that I think says we’re going to continue to build on our strong commercial leadership position and on our unique footprint of U.S. and Europe exposure and capabilities.